Article History JEL Classification:C11, E44, E52. This paper investigates the transmission mechanism of unconventional monetary policies by estimating a time-varying parameter structural vector auto-regression (TVP-VAR) model using Japanese monthly data beginning with the implementation of quantitative easing in 2001. The results of the empirical study can be summarized in four points. First, the accumulated impulse responses of stock prices and exchange rates to a positive monetary policy shock are significant increases and significant depreciation, respectively, in the early days of all unconventional monetary policy periods. Second, a monetary policy shock does not increase bank lending for all unconventional monetary policies. Third, the relationship between an increase in stock prices and the depreciation of exchange rates and increase in GDP has changed since the beginning of Abenomics. Fourth, the accumulated impulse responses of the inflation rate to a positive monetary policy shock became a significant increase during and after the comprehensive monetary easing in October 2010 due to the clarification of the policy duration, and the responses become remarkable after inflation targeting was introduced in January 2013. The first and second results imply that the main transmission channel of unconventional monetary policy in Japan is stock prices and the exchange rate.Contribution/ Originality: This study contributes in the existing literature that we analyze not only the effect on the real economy but also the transmission channel after CME was introduced in October 2010, including the Abenomics period, which began in 2012 with the Abe administration.

This paper investigates the macroeconomic effects of unconventional monetary policies by estimating a time-varying parameter structural vector auto-regression (TVP-VAR) using Japanese monthly data beginning with the implementation of quantitative easing in 2001. The results of the empirical study can be summarized in four points. First, the impulse responses of output to a positive monetary policy shock rose during the period of quantitative easing (March 2001–July 2006) but declined after the comprehensive monetary easing began (October 2010–July 2015). Second, the impulse responses of inflation to a positive monetary policy shock became stably positive after the introduction of inflation targeting in January 2013. Third, the impulse responses of stock prices to positive monetary policy shocks rose each time an unconventional monetary policy was adopted. Finally, the recovery of the credit transmission channel might be attributed to the level of non-performing loans remaining low. The third result implies that increased stock prices from a monetary policy shock are primarily affected by foreign capital because foreign capital responds more strongly than domestic capital to unconventional monetary policy.

In this paper, we compare and analyze the differences in the effects of fiscal and monetary policy using time-varying parameter structural vector auto-regression (TVP-VAR). Specifically, we estimate a 5-variable TVP-VAR model using monthly data from March 2001 to August 2017. The estimation results indicated the following four points. First, expansionary fiscal policy can impact GDP faster than an expansionary monetary policy. Second, expansionary fiscal policy has lowered prices. Third, an expansionary monetary policy can increase GDP more persistently than an expansionary fiscal policy during unconventional monetary policy periods. Finally, expansionary monetary policy has raised prices. These estimation results reveal that if the Japanese government wants to strongly boost GDP alone, it should use fiscal policy alongside monetary policy because fiscal policy can immediately raise GDP. If the Japanese government seeks moderate increases in both GDP and prices, it is more effective to use monetary policy alone without increasing fiscal expenditure.

In the present study, we set up a continuous-time two-sector optimal growth model with services and manufacturing goods and then examine structural change: the rapid growth of the service sector. Earlier studies of structural changes can be separated into two categories: preference-driven and technology-driven. Here we introduce a new and distinct category of structural change: consumption externality identified as rise of the living standard. A key assumption is that (1) a representative consumer has a non-homothetic Stone–Geary type utility function with respect to manufacturing goods and that (2) its subsistence level will be regarded as the standard of living and will be affected by the average consumption of manufacturing goods, which also affects the consumption level of services. We also assume that the manufacturing sector is more capital-intensive than the service sector, which takes an important role in our proofs. Results show that a steady state equilibrium exists that is globally stable as well as saddle-point stable. Then, given certain production parameters in a steady state, there exists optimal steady state where the value-added and employment shares by service sector will dominate those of the manufacturing sector under the condition that external effects of the service sector dominates capital-intensity effect of the manufacturing sector. In other words, through the transition process, the service sector will dominate the manufacturing sector in the steady state.